Real Estate in South Asia

Prashant Das, Ramya Aroul, Julia Freybote

• Publisher: Routledge
• Year: 2019
• eBook ISBN: 9781351233170
• Edition: 1
• Topic: Business
• Subtopic: Finance
• Index: Business

This book provides insights into commercial and residential real estate markets in one of the world's fastest growing regions: South Asia. Despite being the growth leader of the future, South Asia is among the "least integrated" regions with a large need for real-estate-specific information and knowledge. Scholars and industry practitioners from a variety of backgrounds come together to provide pan-regional and country-specific insights into—amongst others—institutional, economic and real estate market characteristics, real-estate-specific legislation, real estate financing, development and urban planning practices in Bangladesh, Bhutan, India, the Maldives, Nepal, Pakistan and Sri Lanka. A particular focus of the book is on topics such as the provision of affordable housing, sustainability, innovative office concepts such as co-working and the development of real estate investment trust (REIT) markets in South Asia.

This book integrates knowledge on real estate markets in and across South Asian countries by means of country profiles and case studies to provide industry professionals, policy makers and scholars with a fundamental understanding of characteristics, opportunities and challenges in the region. The book is intended for readers with interests in real estate development, finance and investment, urban planning and housing in South Asia. It is also suitable as a reference textbook for undergraduate and graduate students in programs focusing on real estate, economic development, urban planning and public policy in South Asia and other emerging countries.

Part I

Pan-South Asia

1 The economics of real estate knowledge in South Asia

An analysis of supply and demand in Bangladesh, Bhutan, India, the Maldives, Nepal, Pakistan and Sri Lanka

Prashant Das, Peter Varga and Emna M’Seddi

Markets are voting machines; they function by taking referenda.

Walter Wriston

As much as we talk about the decision-making behavior of “markets” and “firms”, it is essentially the “collective psychology” of individuals that is at play.¹ Most investment and consumption decisions at individual, firm or market levels are driven by human behavior. Further, human behavior—and by extension real estate investment—is shaped by underlying cultural factors, despite a belief that financial transactions are impersonal and universal.² Real estate phenomena at the market level aggregate divergent attitudes, norms, values and etiquette into one whole characterizing national cultures and economic ideologies.³

Yet a universal, mainly West-centric, perception of conducting business—either normative (i.e. what is right and wrong) or descriptive (to reflect what actually exists)—has been a dominant characterization of scientific work in business paradigms. Nevertheless, most studies have focused on fewer markets. The parochialism—a geographical narrow-mindedness—which has primarily focused on the North American and Western European ways of doing business has overwhelmed the indigenous approaches on how to conduct business in other parts of the world. As a result, the gap between today’s global management knowledge and optimal globalized business practices is still very significant.⁴

Despite some commonalities, the political, economic and social discourses in the world are influenced by local factors. A study⁵ in the early 1990s argued that different cultures understand and react to the same economic and financial issues in dissimilar ways. For example, scientific evidence suggests differential stock investment behavior across countries driven by a varying cultural perception of “trust”.⁶ The scientific community has started to recognize that the globalized business world urgently needs geographically discrete management knowledge to operate efficiently in novel (or unique) national and cultural contexts.⁷ Besides, most theoretical approaches to culture⁸ assert that international awareness is a vital prerequisite for doing business in a globalized environment.

For instance, during the period of the Japanese economic boom between World War II and the end of the Cold War, Western companies sought joint ventures with Japanese firms. However, the Japanese style of doing business was extremely different from the Western style. While US businesses typically looked for fast and efficient results, the Japanese sought to pursue the opposite, i.e. tradition-driven tactics. This challenging historical period persuaded the scientific and business communities to enhance research on cultural differences among nations with the idea of becoming more efficient in cross-cultural settings. Hall’s cultural framework⁹ illuminated the Japanese–US cultural confusion.

Consumer and investor behavior also vary at micro-cultural levels. Hofstede’s (2011) thought-provoking approach compares six cultural dimensions to detect how similar the macro environment is within some cultural circles, such as the South Asian or the Middle Eastern ones. Yet, some latter studies¹⁰ validated a broader notion of “national culture” that impacts risk-taking. More collectivist countries—where social hierarchy is important—exhibit markedly different risk-taking behavior. Studying national or regional cultures may be the first step towards making progress in fostering greater cross-cultural understanding. The Value Orientation Theory¹¹ of the early 1960s argued that cultures can be clustered into dimensions that explain business behavior. For instance, Chinese, Vietnamese and Thai business etiquette might be considered somewhat dissimilar, but at the basic level they do share similar cultural dimensions compared to North American or European business behavior. Regions such as the Middle East, South Asia and South East Asia, among others, show some general patterns that guide business transactions.¹² These cultural resemblances within regions can be traced back to the early 20th-century notion of cultural circles: a centralized culture that diffused its main cultural configurations to surrounding areas.¹³

Institutions which are a set of formal and informal beliefs, norms, rules and regulations play an important role in shaping real estate actors’ behavior and activities. The way these actors interact/negotiate, the way leases are written, the way information is obtained and shared, the way transactions conclude are all contextual. Transparency and market maturity help in structuring these behaviors to some extent but does not eliminate the cultural context completely. In addition, behavior of actors are also shaped by motivations that are embedded in cultural beliefs. In essence, real estate transactions are a consequence of complex interplay of institutional economics and behavioral economics which have local dimension. Generalization of institutions and behaviors across geographies is not possible. This should not be viewed as a limitation but rather an opportunity to diversify real estate decision by including real estate use, investment and development opportunities from different geographies.

Dr. Piyush Tiwari

Professor of Property at the University of Melbourne, Australia

Thus, inferring the consumption or investment behavior from studies conducted on different cultural environments may lead to sub-optimal prediction. Yet the trial-and-error strategy based on the knowledge developed in other nations has been the dominant approach of conducting business in less-developed nations. Primarily driven by management and marketing paradigms, an influential body of literature is emerging which emphasizes the need for either indigenous or regionally-focused research recognizing the need for wider geographic coverage.¹⁴

Indeed, most scientific endeavors in real estate study fewer countries. The main reason behind this is the lack of data and the ‘tradition to study’ this sector (in other countries). Yet, cultural and habitual differences directly impact real estate markets and they need to be studied locally. Real estate business, in particular, is subject to local laws, attitudes and behavior. However, real estate investment is now becoming a really global phenomenon only partially moderated by local regulation, infrastructure, demand and supply.

Dr. Paloma Taltavul de la Paz

Editor, Journal of European Real Estate Research

Full Professor at the University of Alicante, Spain

Some recent studies point towards the need for more inclusive geographic coverage in finance research.¹⁵ Yet, barring a few exceptions,¹⁶ such a dialog is remarkably weak in real estate. Lack of reliable data from other parts of the world, South Asia in particular, is cited as one of the ...

Table of contents

• Cover Page
• Half Title
• Series Page
• Title Page
• Copyright Page
• Dedication
• Table of Contents
• Foreword - Graeme Newell
• Foreword - Jeffrey D. Fisher
• Editors’ Note
• A Synopsis of the Chapters
• Editors and Chapter Contributors
• Panel of Reviewers
• Endorsements
• Part I Pan-South Asia
• Part II Chapters by Country
• Index